Full Breakdown
Court Ruling Opens Path to COVID-Era Tax Refunds
5/6/2026, 9:41:03 PM
Ruling Extends Pandemic Disaster Relief to Tax Penalties
In November 2025 the U.S. Court of Federal Claims issued its opinion in *Kwong v. United States*. The court read IRC § 7508A(d) to automatically suspend all filing and payment deadlines for the COVID-19 disaster period—January 20 2020 through May 11 2023—and to add a 60-day extension. Penalties assessed for late filing, late payment or underpayment of estimated taxes during that window therefore lack statutory authority.
Legal Basis and Deadline
Section 7508A(d) mandates deadline extensions whenever a federal disaster is declared. The decision set the adjusted filing deadline at July 10 2023. Because the statute of limitations is three years, taxpayers must file a claim by July 10 2026 to preserve any refund right.
Key Players
The case involves plaintiff Terry Kwong, National Taxpayer Advocate Erin M. Collins, Treasury tax-policy official Kenneth Kies, Fox Rothschild partner Jon Wasser, Tax Guard co-founder Dave Bohrman, the IRS and the Department of Justice.
Refund Potential and Impact
The IRS reported over $12 billion in penalties for fiscal 2022 (12 million estimated-tax and 16 million failure-to-pay). The National Taxpayer Advocate estimates “tens of millions” of taxpayers—including individuals, small businesses, corporations, estates and trusts—could claim refunds of those penalties and interest. If upheld, billions could be returned, but the paper-only Form 843 process may favor those with advisors, risking many taxpayers missing the July 10 2026 deadline and straining IRS processing.
Official Responses and Criticism
Treasury’s Kenneth Kies called the ruling “a misreading of the plain language of the statute” and said it “will continue to defend the statutory language as written.” The DOJ has signaled an appeal. Collins called it a “major refund opportunity” and urged filing by July 10 2026. Bohrman warned the claim process is “not as simple as ‘the IRS owes everyone money’” and that many may not qualify. Wasser urged filing a “protective claim” to preserve rights.
Conflicts and Gaps
The court’s view conflicts with the Treasury’s reading, and no appellate decision is pending. The IRS lacks an electronic filing option, creating uncertainty about claim receipt and processing. Exact numbers of eligible refunds remain unquantified.
Verbatim Quotes
- “is a misreading of the plain language of the statute,” — Kenneth Kies, Acting IRS Chief Counsel
- “will continue to defend the statutory language as written.” — Kenneth Kies, Acting IRS Chief Counsel
- “unless the IRS or Congress acts to ensure all affected taxpayers will receive refunds … taxpayers seeking refunds for penalties and interest they paid relating to that period will, in most cases, need to file claims by July 10, 2026.” — Erin M. Collins, National Taxpayer Advocate
- “You’re basically telling the IRS, 'Here’s a refund claim, put it on hold for now,'” — Jon Wasser, Partner, Fox Rothschild
Next Steps
Taxpayers must submit a paper Form 843 marked as a protective claim by July 10 2026, preferably via certified mail. The Department of Justice’s appeal and any higher-court rulings will determine whether the IRS must issue refunds. The National Taxpayer Advocate urges low-income filers to seek professional assistance to avoid missing the deadline.
